Indian Metals and Ferro Alloys Ltd. and Another vs State of Orissa and Another

R.N. Biswali, J.—The facts and law involved in all the writ petitions being the same, albeit IMFA and NALCO raised some extra points of

facts and laws, they are heard analogously and the following common judgment is passed thereon.

In all the writ petitions, the Petitioners, all of whom generate energy for their own consumption, challenge the vires of the Orissa Electricity Duty

Act, 1961 (hereinafter referred to as ''the Act'') in so far as Sections 2, 3 and 5 thereof are concerned. They also challenge the notification No.

7721-P-II-Ed.15/92 E wherein Electricity Duty was fixed '' 12 paise for a person not being licencee or board who generate such energy for his

own use or consumption. They further challenged the Notification No. GRIDCO-ED-3/2001-18237, dated 10.10.2001 issued by State

Government in their Department of Energy, wherein electricity duty was increased from 0.12 paise to 0.20 paise per unit. According to the

Petitioners, the impugned impost is expressly on generation/production of electricity, which is beyond the scope and ambit of Entry 53, List-II of

Schedule VII of the Constitution of India. In fact, it falls within the legislative field under Entry 84, List-I, Schedule-VII of the Constitution of India.

The impost being beyond the legislative competence of the State Legislature, it is ab-initio void and non-est. The Petitioners, who do not consume

electricity pursuant to any supply, are not liable to pay the duty imposed. Furthermore, the Petitioners being not consumers, as defined in Section

2(c) of the Act, they are not liable to pay the same. If Section 3(1) of the Act is zallowed to sustain, it would amount to be an uncanalized,

unguided and uncontrolled delegation of power on the Executive. The Petitioners further question the validity of categorization of the consumers.

The impugned enhancement is discriminatory, as it singles out the Petitioners, who generate electrical energy from their captive power plants for

their own consumption. In terms of Section 3(ii) of the Act 1961, the impugned notification having not been laid before the State Legislature, it is

wholly invalid in the eye of law. So, the Petitioners pray to declare Sections 2, 3 and 5 of the Act ultra vires; to quash the notifications dated

25.4.1992 and 10.10.2001 prescribing payment of electricity duty to be paid by them and the demand notice for deposit of Electricity Duty '' 0.20

paise and to direct the opp. parties to refund the excess amount of Electricity Duty paid and for consequential relief. It is the further prayer of

ICCL to set aside the order dated 14.5.2004 rejecting their claim as licensee. Similarly NALCO has further prayed to strike out the words ""so

however, that such notifications shall be without prejudice to the validity of any electricity duty levied or collected under the notifications,"" from

Section 3(ii) of the Act.

Opp. parties 1 and 2 in their joint counter affidavit contended that the impugned impost being on consumption of electrical energy, it is covered

under Entry 53, List-II of Schedule VII of the Constitution as such the State Legislature is competent to legislate thereon. The Notification dated

25.4.1992 and 10.10.2001 prescribing payment of Electricity Duty by the Petitioners is most rational and reasonable. Similarly, situated units have

been paying the enhanced electricity duty without any grumble. The Petitioners were paying Electricity Duty '' 6.12 paise per unit with effect from

25.4.1992. After long 10 years, it was enhanced to 0.20 paise. In the meantime, tax rate in the other Government Sectors has been increased

manifold. In a welfare State, the revision in the rate of tax is inevitable to meet the increasing burden on the State Exchequer. In Central

Government Undertakings like RSP, NTPC and State Government undertakings like OHPC and OPGC are paying Electricity Duty '' 0.20 paise

per unit. It is the further case of the opp. parties that as per Section 3(1)(d) of 1961 Act, Electricity Duty is being levied at different rates on

different types of consumers. Accordingly, the electricity duty '' 20 paise per unit cannot be said as arbitrary and unjustified. The classification being

reasonable, there is no violation of any constitutional provision. The notification was laid before the State Legislature in the session held on

10.12.2004. Accordingly, the opp.parties prays to dismiss the writ petitions.

In view of the nature of dispute, it would be prudent to give the historical background of Legislation on Electricity Duty in the State of Orissa.

Duty on consumption of electrical energy was first introduced by the Orissa Electricity (Duty) Act, 1961, which came into force on 14.10.1961.

u/s 3 thereof, the duty was payable on rate charged at different percentage basis. In Orissa Electricity (Duty) Amendment Act, 1986, Section 3 of

the Principal Act was amended and electricity duty was fixed in the schedule of the Act prescribing different rates for different categories of

consumers. The next amendment was introduced in the year, 1992, in which, Section 3 of the Act was fully substituted and legislature delegated

powers to the State Government to levy duty on different types of consumers. On the basis of the said amended provision, the notification dated

10.10.2001 was issued, wherein the Petitioners were to pay 20 paise per unit instead of 12 paise, which they were paying earlier.

At the outset, it was argued by learned Counsel for the Petitioners that the impugned impost is expressly on generation of electricity, which is

beyond the scope and ambit of Entry-53, List-11 of Schedule-VII to the Constitution of India. In fact, it falls under Entry 84, List-1 of Schedule-

VII of the Constitution and as per Article 246(1) thereof, Parliament has exclusive power to legislate thereon. Entry 84 of List 1 of Schedule VII

enumerates duties of excise on tobacco and the other goods manufactured or produced in India except alcoholic liquors for human consumption,

opium, Indian hemp and other narcotic drugs and narcotics. Since the Petitioners-company generate/manufacture electrical energy from their

captive power plants and electrical energy comes under the category of goods, duty can be imposed in respect of generation of electrical energy

by the Parliament and not the State Legislature. As such, the impugned impost is ab-initio, void and non-est in the eye of law. On the other hand,

Mr. N.C. Panigrahi, learned senior counsel appearing for opp. parties contended that as per Article 246(3) of the Constitution, State Legislature

can impose tax on the consumption of electricity, under Entry 53, Schedule VII of the State list. He further contended that Orissa Electricity Act

was passed in the year, 1961. There was no challenge to it till these cases were filed in the year, 2004. So, at such a belated stage, it cannot be

challenged.

Taxes on consumption or sale of electricity with reference to Entry 53 of Schedule VII, List II should be read as ''taxes on consumption or sale

for consumption of electricity within the State. Sale of electricity for consumption outside State is subject to provision of Entry 92-A of the List.

Since tax is imposed under the impugned Act on consumption of electricity in side the State, State Legislature is competent to pass such an Act. It

cannot be held the impugned Act imposes duty on generation or production of electricity as submitted by learned Counsel for the Petitioners. In the

decision The Jiyajeerao Cotton Mills Ltd. Vs. State of Madhya Pradesh, , the Appellant, a Textile Mill owner was generating electricity for running

his mills. Under the provisions of the Central Provinces and Berar Electricity Duty Act, 1949 as amended by the Madhya Pradesh Taxation Laws

amended Act, 1956 the Government of Madhya Pradesh levied upon the Appellant electricity duty on consumption. One of the grounds taken by

him before the apex court that if the act permitted the levy of duty on electricity consumed by the producer himself it was ultra vires the

Constitution because in substance it would be a duty of excise which can be levied only by parliament under Entry 84 of List I and that even if it

was not excise duty it was beyond the competence of the Madhya Pradesh Legislature to levy it in the absence of any appropriate entry in List-II.

The apex court turned down the argument, holding as follows:

(6) It is difficult to see the levy of duty upon consumption of electrical energy can be regarded as duty of excise falling within Entry 84 of List-I.

Under that Entry what is permitted to Parliament is levy of duty of excise on manufacture or production of goods (other than those excepted

expressly by that entry). The taxable event with respect to a duty of excise is ""manufacture"" or ''production''. Here the taxable event is not

production or generation of electrical energy but its consumption. If a producer generates electrical energy and stores it up, he would not be

required to pay any duty under the Act. It is only when he sells it or consumes it that he would be rendered liable to pay the duty prescribed by the

Act.

Similarly, in the case of Orient paper and Industries Ltd. v. Orissa Electricity Board and Ors. 67 (1989) CLT 693, it was held that the State

legislature can impose duty on consumption of electricity under Entry 53 list-II of the VII schedule of the constitution of India. So, it is cleared that

electricity duty can be imposed on consumption of electrical energy by the State legislature under Entry 53 list-II of the VII schedule of the

constitution of India.

Next, it was submitted by learned Counsel for the Petitioners that Section 3 of the Act empowers the State Government to impose electricity

duty at such rate not exceeding 25 paise per unit by issuing notification from time to time. By invoking power under Sub-section (2) of Section 12

of the Act, the State Government has framed Orissa Electricity Duty Rules, 1961, but there is no guideline for imposing duty while giving effect to

Section 3 of the Act. There is also no administrative instruction to that effect. So, according to learned Counsel for the Petitioners, in absence of

any Rules or guidelines, the matter is left to the total discretion of the Energy Secretary, who can pick and choose the category of consumers and

decide the rate of duty by notification, particularly when there is no provision for appeal or revision in the Act, against such notification. There being

excessive delegation of power, the notification can be arbitrary, unreasonable and discriminatory of which the impugned notifications are examples.

On the other hand, Mr. Panigrahi, learned Senior counsel appearing for the opp. parties contended that guidelines have been provided u/s 3 itself

by fixing the maximum duty '' 25 paise per unit and by providing that the notification should be laid before the State Legislature as soon as the same

is issued for a total period of fourteen days and if during the said period, the State Legislature makes modification therein, the notification shall

thereafter have effect only in such modified form.

In the case of Pandit Banarsi Das Bhanot Vs. The State of Madhya Pradesh and Others, , it has been held that the authorities are clear that it is

not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as, selection of

persons on whom the tax is to be paid, the rate at which it is to be charged in respect of different classes of goods and the like. In the case of

M.K. Papiah and Sons Vs. The Excise Commissioner and Another, , it has been held that the laying of rules before the legislature is controlling

power on the delegated legislation. The legislature may also retain its control over its delegate by exercising its power of repeal of the Act. So, it

can not be said that there was no guidelines.

Learned Counsel appearing for the Petitioners, next submitted that as per Section 3(ii) of the Act, all notifications issued by the State

Government from time to time under Sub-section (1) should be laid before the State Legislature as soon as may be for a period of 14 days, which

may be comprised in one or more sessions. The notification dated 10.10.2001 even though was issued on 10.10.2001 itself, it was laid before the

State Legislature in the year, 2004. In the case of General Insurance Council and Others Vs. State of Andhra Pradesh and Others, so also in the

case of Ibrahim Ahmad Batti alias Mohd. Akhtar Hussain alias Kandar Ahmed Wagher alias Iqbal alias Gulam Vs. State of Gujarat and Others, ,

it was held by the Apex Court that ""as soon as "" means, do it within a shortest possible time. According to learned Counsel for the Petitioners, it is

the established principle of law that if a statute requires a thing to be done in a particular manner, it must be done in that manner. The statute in the

present case requires that the notification should be placed before the Assembly as soon as it is issued. The executive authority, which is a creature

under the statute, cannot stall the statutory provision and obstruct the process of the statute. In this context, Mr. Panigrahi learned senior counsel

contended that the notification was laid before the State legislature in the sessions held on 10.12.2004. As required under laws, since it could not

be laid before the Assembly for 14 days, it was again re-laid on 7.3.2005. The aforesaid fact of laying before the Legislative Assembly sufficiently

established that the rates of duty as amended vide notification No. 18237 dated 10.10.2001 was accepted and approved by the State Legislature.

Moreover, laying the notification before the Assembly is directory and not mandatory. Violation of the said principle does not invalidate the

notification. In support of his submissions, Mr. Panigrahi relied on the decisions Atlas Cycle Industry Limited v. State of Haryana AIR 1979 (SC)

1149, Indian Aluminium Co. Ltd. Vs. State of Orissa and Others, , and Orissa Consumers Association v. OERC 2004 (II) OLR 673.

In M/s. Atlas Cycle Industries Limited (supra), pursuant to Section 3 of Essential Commodities Act, Iron and Steel Control Order fixing

maximum ceiling price on various categories of irons and steel was passed by the Central Government. Sub-section (6) of Section 3 of the

Essential Commodities Act reads as follows:

Every order made under this section by the Central Government or by any officer or authority of the Central Government shall be laid before both

Houses of Parliament, as soon as may be, after it is made.

The point for consideration before the Supreme Court in the said case was whether laying down of the order of the Central Government, fixing

maximum ceiling price on various categories of iron and steel including black plain iron sheets, before both Houses of Parliament was mandatory or

merely directory. The Apex Court in Para 22 of their judgment held as follows:

In the instant case, it would be noticed that Sub-section (6) of Section 3 of the Act merely provides that every order made u/s 3 by the Central

Government or by any officer or authority of the Central Government shall be laid before both Houses of Parliament, as soon as may be, after it is

made. It does not provide that it shall be subject to the negativeor the affirmative resolution by either House of Parliament. It also does not provide

that it shall be open to the Parliament to approve or disapprove the order made u/s 3 of the Act. It does not even say that it shall be subject to any

modification which either House of Parliament may in its wisdom think it necessary to provide. It does not even specify the period for which the

order is to be laid before both Houses of Parliament nor does it provide any penalty for non-observance of or non-compliance with the direction

as to the laying of the order before both Houses of Parliament. It would also be noticed that the requirement as to the laying of the order before

both Houses of Parliament is not a condition precedent but subsequent to the making of the order. In other words, there is no prohibition to the

making of the orders without the approval of both Houses of Parliament. In these circumstances, we are clearly of the view that the requirement as

to laying contained in Sub-section (6) of Section 3 of the Act falls within the first category i.e. ""simple laying"" and is directory not mandatory.

Section 3(ii) of Orissa Electricity (Duty) Act, reads as follows:

All notifications that may be issued by the State Government from time to time under Sub-section (1) shall, as soon as may be after they are issued,

be laid before the State Legislature for a total period of fourteen days which may be comprised in one or more sessions and if during the said

period the State Legislature makes modification if any, therein, the notifications shall thereafter have effect only in such modified form, so however,

that such modifications shall be without prejudice to the validity of any electricity duty levied or collected under the notifications.

In this provision, the period of laying down before the Legislature has been specified. The Legislature can also modify the said order. If it is so

modified, then the notification shall have effect only in such modified form. But no penalty has been prescribed for not laying down the notification

before the State Legislature. A similar provision is there u/s 44 of the Orissa Survey and Settlement Act which reads as follows:

Rules to be laid before Assembly-All rules made u/s 43 shall, as soon as may be after they are made, be laid before the State Legislature for a

total period of fourteen days which may be comprised in one or more sessions, and if during the said period the State Legislature makes any

modifications therein, the rules shall thereafter have effect only in such modified form, so, however, that such modification shall be without prejudice

to the validity of anything previously done under the rules.

Here, the period of laying the order before the State Legislature is fixed and the legislature has also been vested with power to modify the Rules. In

context of this provision, this Court held in the case of M/s. Indian Alluminium Company Ltd (Supra), as follows:

The Orissa Legislature never intended that the noncompliance of the requirement of laying the Rules as envisages in Section 44 of the Survey and

Settlement Act would render the Rules invalid. In this view of the matter even after the Rules framed had not been laid before the Assembly the

same remained valid and therefore the authorities had jurisdiction to fix a fair and equitable rent in respect of nonagricultural land under the Rules in

question.

Similarly, in the case of Orissa Consumers Association (supra) this Court held that:

Where a statute directs that the rules shall be laid before the legislature whether direction is mandatory or directory depends upon several

consideration notwithstanding the use of expression ""shall"" and the requirement can be held to be directory, where no penalty is attached under the

statute for non-laying of the Rules before the Legislature.

In the case at hand, no penalty has been attached to the relevant provision for non-laying of the notification before the State Legislature. There is

also no provision to show that non-laying of the notification before the State Legislature would render the notification invalid. But, as we have

stated earlier the impugned notification was laid before the State Legislature, albeit at a belated stage, so the notification dated 25.4.1992 and

10.10.2001 prescribing payment of electricity duty to be paid by the Petitioners cannot be quashed.

Next, it was submitted by learned Counsel for the Petitioners that vide impugned notification dated 10.10.2001 the rate of electricity duty has

been enhanced from 0.12 paise per unit to 0.20 paise, only in respect of the companies, those who generate energy for their own consumption.

Charging higher rate of electricity duty upon the industries having captive source is discriminatory and violative of Article 14 of the constitution of

India. The Petitioners'' companies are all power intensive industries. As per the schedule appended to Orissa Electricity Duty Act, 1986 electricity

was levied '' 0.18 paise on the power intensive industries and '' 0.12 paise on any person not being a licensee or Board, who generates such

energy for his own use or consumption. The notification dated 25.4.1992 prescribed levy of duty '' 0.15 paise on power intensive industries. So,

the intensive units gained '' 0.03 paise per unit. At the same time the captive generators were levied with same duty '' 0.12 paise. The notification

dated 25.4.1992 has now been amended by notification dated 10.10.2001 whereby rate of duty payable by a person not being licensee or the

Board who generates energy for his own use or consumption has been increased from 0.12 paise per unit to 0.20 paise -an increase by 67%.

Under the circumstances, the duty now being levied on the consumers with their own captive source of energy is higher than the duty levied on the

power intensive units who purchase electricity from the distribution companies. So, it was argued that the classification of power intensive industries

having their own captive source of power and the power intensive industries who purchase energy from out source is arbitrary, unreasonable and

discriminatory, as it bears no reasonable nexus with the object of the legislation. The Petitioners'' industries, which are power intensive units cannot

be discriminated only because they consume electricity from their own source. According to learned Counsel for the Petitioners, the impugned

notification being violative of Article 14 of the constitution of India is liable to be struck out. In support of such submission, learned Counsel for

Petitioners relied on the decision Indian Express News papers (Bombay) Pvt Ltd and Ors. etc. etc. v. Union of India and Ors. A I R 1986

S.C.515, The State of Kerala Vs. Haji K. Haji K. Kutty Naha and Others etc., , Ayurveda Pharmacy and Another Vs. State of Tamil Nadu, ,

The Delhi Cloth and General Mills Company Limited (now Shriram Industrial Enterprises Limited) and Another Vs. The Municipal Corporation of

Delhi and Others, and the decision in Associated Cement Co. Ltd. v. State of Chhattisgarh decided on 15.12.2006 by Chhattisgarh High Court,

Mr. Panigrahi, learned senior counsel appearing for opp. parties contended that the classification was reasonable and as such there was no

question of violation of Article 14 of the Constitution.

In the decision Indian Express News papers (Bombay) Private Ltd. and Ors. (supra), the apex court held that classification of the newspapers

small, medium and big for levying custom duty is not violative of Article 14 of the Constitution. So, this decision is not helpful to the Petitioners. In

the case of State of Kerala (supra), Kerala Buildings Tax Act (Act 19 of 1996) was challenged on the ground that it infringed Articles 13, 14 and

265 of the Constitution since Section 4 of the said Act, which was the charging section read with schedule of the Act was violative of the equality

clause of the constitution as there was no rational classification. In that case the Legislature adopted merely the floor area of the building as the

basis of tax. It did not take into consideration the class to which the buildings belong, the nature of construction, purpose for which it was being

used, its situation, its capacity for profitable user and other relevant circumstances which have a bearing on matters of taxation. So, the Act was

rightly declared ultra vires. The said decision cannot be applicable to the present case.

In the case of Ayurveda Pharmacy and Anr. (supra) higher rate of tax was levied on two medicinal preparations, namely, Arishtams and Asavas on

the ground that they contained high percentage of alcohol in comparison to other medicinal preparations. So, the apex court held that as those two

medicines continue to be identified as medicinal preparations, they must be treated in a like manner as other medicinal preparations those which

contained lower percentage of alcohol. Accordingly, it was held that levying of higher rate of sales tax on those two ayurvedic preparations was

discriminatory. In our considered opinion this decision is also not applicable to the present case.

In the case of Delhi Cloths and Gen. Mills Company Ltd. (supra)the Delhi High Court held that it was an admitted case that MCD was unable to

supply electricity to the Petitioner as per its requirement. Per focre the Petitioner installed its own Turbo Generators at a cost of rupees ten crores.

The MCD proposed to increase the tax on consumption of electricity in respect of the Petitioner therein, who was generating electricity from its

own source, but not on those who were supplied with electricity by the MCD. The Petitioner was required to pay tax '' 0.05 paise per KWHR

and a consumer who was supplied with electricity by the MCD was to pay tax '' 0.03 paise per KWHR. So Delhi High Court held that imposition

of tax '' 0.05 paise per KWHR on the consumers of electricity, generated by themselves vis-�-vis those consumers, who got energy from MCD

is per se unreasonable, arbitrary and discriminatory.

In the case of Associate Cement Co. Ltd v. State of Chhatisgarh, the notification, which required generator of electricity to pay a higher cess when

the energy was consumed by the generator itself was under challenge. On examining the national electricity policy, national tariff policy and various

measures taken by the State to engage captive generators, it was held by Chhatisgarh High Court that the impugned notifications was

discriminatory, unreasonable and violative of Article 14 of the Constitution of India and as such vide their judgment dated 15.12.2006 struck out

the notification.

But, in the case of State of Uttar Pradesh and Ors. v. Renusagar Co. and Ors. AIR 1988 (SC), the Apex Court has held that the exercise of

power whether legislative or administrative will be set aside, if there is manifest error in exercise of such power or the exercise of power is

manifestly arbitrary. Similarly, if the power has been exercised on a non-consideration or non-application of mind to the relevant factors, the

exercise of power will be regarded as manifestly erroneous. In the case of M/s. Shri Sitaram Sugar Co. Ltd. and another Vs. Union of India and

others, , the Apex Court has held that judicial review is not concerned with the matter of economic policy. The Court does not substitute its

judgment for that of the legislature or its agents as to matters within the province of either. When the legislature acts within the sphere of its validity

and delegates powers to an agent, it may empower the agent to make findings of fact which conclusively provides that such findings specified the

basis of reasonableness. In all such cases, judicial enquiry is confined to the question whether the findings of fact is reasonably based on evidence

and whether such findings are consisted with the laws of land. Price fixation is not within the province of the Court. Judicial function in respect of

such factor is exorbitant when it is found to be a rational basis for the conclusion reached by the concerned authority. In that case, the Central

Government classified the sugar factories for the purpose of determining the price of levy sugar in terms of Section 3(c) of the Essential

Commodities Act (10 of 1999), on the basis of their geographical location. Factories were classified with due regard to the geographical-cum-agro

economic consideration. Such classification in absence of the evidence to the contrary can not be characterized as arbitrary or unreasonable or not

found on intelligible differentia having a rational nexus with the object sought to be achieved. The persons assailing such classification carries heavy

burden for convincing that it is invalid because it is unjust and unreasonable. In the case of Ram Krishna Dalmia Vs. Shri Justice S.R. Tendolkar

and Others, the apex court has held that Article-14 of the constitution does not forbid reasonable classification for the purpose of legislation. In

order, however, to pass the test of permissible classification two conditions must be fulfilled namely (i) that the classification must be founded on an

intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that the differentia

must have a rational relation to the object sought to be achieved by the statute in question. A law may be constitutional even though it relates to a

single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual is

treated as class by himself. In the case of P.J. Irani Vs. The State of Madras, , the vires of Madras Building (Lease and Rent Control) Act, 1944

was under challenge. The purpose of the Act was to prevent any unreasonable alienation and also to control rent. The Apex Court has held that in

considering whether the reasons given by the Government are sufficient to prove the order within the object of the Act, the High Court had no

power to act as if it was sitting in appeal over the Government decision. A court cannot set aside an order u/s 13 on the ground that it would not

itself have made the order for the reasons for which the Government had made it. All that the court has to see whether the power was used for an

extraneous purpose, i.e., to say not for achieving the object for which the power had been granted. When it is. alleged that the power was used for

a purpose other than achieving an object for which the power is granted, initial onus must be on a party which alleged abuse of power and there

must be prima facie evidence in support of the allegation, it is only then that the onus may shift. In the decision Dai-Lchi Karia Ltd v. Union of India

and Ors., AIR 2000 (SC) 1741, the Apex Court held that the Court can examine whether relevant factors were taken into account while issuing

notification under the Act. The mere fact that the notification issued under an Act is. required to be laid before the Parliament, does not make any

substantial difference as regard the jurisdiction of the Court to pronounce its validity. Further, if it is challenged in Court that a particular notification

has been made contrary to public interest, there can be no presumption that the action of the Government is in public interest.

Here, in the case at hand, the Petitioners who are power intensive industries and consume energy from their Captive Power Plants have been

singled out from all other consumers including power intensive industries, which consume electrical energy from outside. The object of Act was to

augment revenue to expand the development activities of the State. Admittedly, there was no change of duty from 1992 to 2001 in respect of the

Petitioners. The increase of duty from 0.12 paise to 20 paise after long 9 years is not unreasonable. Because of the view taken by the Apex Court

in the cases of State of Uttar Pradesh and Ors. (supra), M/s. Shri Sitaram Sugar Co. Ltd. (supra), Shri Ram Krishna Dalmia (supra), P.J. Erani

(supra) and Dai-Lchi Karia Ltd. (supra), the view taken by Delhi High Court in the case of Delhi Cloths and G. Mills Company Ltd. (supra) and

the view taken by Chhatisgarh high Court in the case of Associate Cement Co. Ltd. (supra) cannot be accepted.

Learned Counsel appearing for the IMFA further submitted that in the initial recommendation made on 25th April, 2001 by the Chief Electoral

Inspector to the Government of Orissa represented through Secretary to Government in their Department of Energy for increase of electricity duty,

the proposed increase for captive consumers was only 0.3 paise whereas for power intensive, it was 0.5 paise per unit, so also for domestic and

public institution. However, when the matter was placed before the Government, the rate of electricity duty on domestic consumers and others was

not increased, out of fear of adverse public reaction, but it was increased from 12 paise to 20 paise in respect of the persons not being licensee or

Board, who generate energy for his own use or consumption on the ground that, it would not affect the domestic consumers of the State, and, as

such, would not invite adverse public reaction. So, the grounds of increase of the electricity duty on captive power units are based on extraneous

and irrelevant considerations. As against this, Mr. Panigrahi, learned Counsel appearing for the opp. parties contended that recommendation or

suggestion of the Chief Electoral Inspector is not binding of the State. So, even if there was such a suggestion, it would have no effect. We are in

agreement with the view of Mr. Panigrahi, learned senior counsel. So, it cannot be said that the classification was discriminatory, arbitrary,

unreasonable and violative of Article 14 of the Constitution of India.

Learned Counsel appearing for ICCL/IMFA further submitted that Section 14 of Orissa Electricity Reforms Act, 1995 lays down that no

person, other than those authorized to do so by licence or by virtue of exemption under the said Act or otherwise or exempted by any other

authority under Electricity (supply) Act 1948 can be engaged in the State in the business of transmitting or supplying electricity. As per Section 2(e)

of Orissa Electricity Reforms Act, 1995 licence means a licence granted under Chapter-VI. Section 2(f) defines licence or licence holder as a

person licensed under Chapter-VI to transmit or supply energy including GRIDCO. The aforesaid provisions came for interpretation in the case of

Grid Corpn. of Orissa Ltd. Vs. M/s. Indian Charge Chrome Ltd., , where the apex court held that IMFA is a licensee. Per contra, Mr. Panigrahi,

learned Senior Counsel appearing for the opposite parties contended that ICCL/IMFA started commercial production on 5.2.1989 and was

granted 50% exemption of electricity due for a period of 10 years in accordance with policy of the State Government. In the year 1986, the

electricity due for C.G.P had been fixed at 12 paise per unit and hence ICCL/IMFA paid the duty '' 6 paise per unit for 10 years. After 5.2.1999

ICCL/IMFA continued to pay electricity duty '' 12 paisa being covered under Entry No. 18 as CPP under the 1992 notification and continued to

pay at that rate. After issue of notification on 10.10.2001 for the first time they claimed as licensee as per the order of the Apex Court in the case

of Grid Corporation of India Ltd. (supra). Even though the Apex Court order was passed on 3.9.1998 ICCL/IMFA did not claim to be covered

under the category of licensee until the impugned notification was issued on 10.10.2001. He further submitted that the apex court order was not a

final, but an interim order. This Court in the case of Grid Corporation of Orissa Ltd. Vs. Indian Charge Chrome Ltd., recorded that ICCL/IMFA

is a licensee under the Indian Electricity Act, 1910, which was set aside by the apex court and in paragraph 15 of their judgment the apex court

recorded the finding that though no formal license was issued to ICCL u/s 2(h) of Indian Electricity Act, yet relying on the provisions contained u/s

14(1) of the Electricity Reforms Act 1995, the Apex Court held that since ICCL was authorized to supply electricity to OSEB and thereafter to

GRIDCO, ICCL would be arbtrable u/s 37(1) read with Section 33 of the Reforms Act. Mr. Panigrahi drew our attention to the relevant portion

of the said judgment which reads as follows:

From the facts noted herein above and in view of Section 14(1) of the Reforms Act it is quite clear that ICCL was/is authorized and engaged in

supplying the electricity to OSEB and thereafter to GRIDCO and ICCL would be arbitrarible u/s 37(1) read with Section 33 of the Reforms Act,

1995.

So, according to Mr. Panigrahi, learned senior counsel, the aforesaid decision would not be applicable to the present case.

Section 2(e) of Orissa Electricity Duty Act, 1961 defines licensee as follows:

Licensee means any person licensed under part-II of the Indian Electricity Act, 1910 to supply energy and includes any person, who has obtained

the sanction in that behalf of the State Government u/s 28 of the said Act.

The aforesaid definition of licensee was thereafter amended by Act 15 of 1998 and after amendment, it reads as follows:

Licensee means any person licensed under part-I of the Indian Electricity Act, 1910 to supply energy.

Since ICCL/IMFA has not been licensed to supply energy in terms of 1998 Amendment Act, it cannot claim as a licensee. As regards the

judgment delivered in Grid Corporation of Orissa Ltd. (supra), the Apex Court did not hold that ICCL/IMFA was a licencee, but since it was

authorized to supply electricity to OSEB and thereafter to GRIDCO, the dispute between the GRIDCO and ICCL could be arbitrable u/s 37(1)

read with Section 33 of the Reforms Act, 1956. As it appears, the definition of licencee as amended by Act 15 of 1998 was not brought to the

notice of the Apex Court. The Apex Court has not specifically held that ICCL/IMFA is a licencee. Section 41 of the Reforms Act, 1995 lays

down that a licencee or any person exempted under the Act or authorized or exempted by any other authority under the Electricity (supply) Act,

1948 shall engage in the State in the business of transmitting or supplying electricity. So, even if it is held that ICCL/IMFA was authorized to do so

still then it cannot be said to be a licencee for payment of electricity duty at lesser rate in terms of notification dated 10.10.2001.

Mr. R.K. Rath, learned senior counsel appearing for the Petitioner (NALCO) in O.J.C. No. 966 of 2001 submitted that electricity duty can

not be imposed on the electrical energy lost during transmission to the point of consumption as duty on consumption, since, in fact, the Petitioner-

company did not consume the same. In support of his submission, he relied on the decision in the case of State of Mysore Vs. West Coast Papers

Mills Ltd. and Another, which reads as follows:

The one question with which we are concerned in this appeal is whether electricity tax is payable in respect of the electrical energy which is lost in

transmission as a result of transmission loss or transformer loss. So far as this question is concerned, we are of the view that no tax is payable on

the electricity so lost. The entire scheme of the Act is to tax the consumption of electrical energy. Where some energy is not consumed but lost

before it reaches the point of consumption, the question of levy of tax on consumption of such energy would not in the very nature of things arise.

The place of consumption of electrical energy is normally at some distance from the place where electrical energy is generated. Electrical energy

has consequently to be transmitted through metal conductors to the place where it is consumed. Such transmission admittedly entails loss of some

electrical energy and what is lost can plainly be not available for consumption and as such would not be consumed. If a person, for example,

generates 100 units of electrical energy and loses 10 units in the process of transmission from the point of generation to the point of consumption,

he would in the very nature of things be able to supply only 90 units of electrical energy to the consumers. The tax which would be payable on the

electrical energy consumed in such a case would be only for 90 units and not 100 units. To hold otherwise and to realize tax on 100 units of

electrical energy would be tantamount to levying tax on the generation or production of electrical energy and not on its consumption.

Mr. N.C. Panigrahi, learned senior counsel appearing for the opp. parties contended that since the Captive Power Plant and the Smelter Plant of

NALCO situate in the same premises at Angul, there being no loss for transmission, the question of deducting transmission charge does not arise.

Mr. Rath, learned senior counsel further contended that the distance between the Angul Captive Power Plant and the Smelter plant is about 5.959

K. Ms. This has not been countered by learned Counsel for the opp. party during argument. So, certainly some energy is being lost during the

process of transmission on which the NALCO is not liable to pay duty. Duty if any paid by NALCO, on transmission loss shall be calculated and

refunded to it by opposite parties or the same shall be adjusted with its dues within three months hence.

Mr. Rath, learned senior counsel further contended that the words ""so however, that such modifications shall be without prejudice to the validity of

any electricity duty levied or collected tinder the notifications"" shall be strike out from Section 3(ii) of Orissa Electricity Duty Act, 1961. Section

3(ii) reads as follows:

All notifications that may be issued by the State Government from time to time under Sub-section (1) shall, as soon as may be after they are issued,

be laid before the State Legislature for a total period of fourteen days which may be comprised in one or more sessions and if during the said

period the State Legislature makes notifications if any, therein, the notifications shall thereafter have effect only in such modified form, so however,

that such modifications shall be without prejudice to the validity of any electricity duty levied or collected under the notifications.

According to Mr. Rath, if the notification is laid before the State Legislature after four years of its issuance, as in the present case and the

Legislature reduces the rate of electricity duty, then, the consumer cannot claim the excess amount he paid for four years which is arbitrary,

discretionary and against the principle of natural justice. So, the same deserves to be strike out. We are in agreement with the view of learned

Counsel for NALCO in this regard. So, the words ""so, however, that such modifications shall be without prejudice to the validity of any electricity

duty levied or collected under the notifications"" deserve to be strike out from Section 3(ii) of the Orissa Electricity Duty Act, 1961, and,

accordingly, they are struck out.

The writ petitions are disposed of.

Accordingly, all the interim orders of stay of realization of the amount are vacated. In view of vacation of the stay orders, the Petitioners, namely,

M/s. Indian Metals and Ferro Alloys Ltd., Ballarpur Industries Ltd. and M/s. National Aluminium Company Ltd., who had been directed earlier

by this Court to keep the differential amount in separate accounts are directed to deposit the same (differential amount) in the State Exchequer

within a period of four weeks from today.